Microsoft tries to muscle Yahoo

Microsoft tries to muscle Yahoo and kick start the future of communication. On Monday Microsoft publicly announced the virtues of its 44.6-billion-dollar bid to take over the Internet firm as Google maneuvers behind the scenes to stop this takeover. Microsoft Corp.'s $45 billion takeover bid appears to have backed Yahoo Inc. into a corner, leaving the struggling Internet pioneer with the unpleasant choice of selling to a detested rival or pursuing other agonizing alternatives likely to require the help of an even fiercer foe, Google Inc.

The Wall Street Journal and the New York Post reported Friday that executives of the two companies are in early-stage discussions of a merger or some other kind of collaboration, although Microsoft officials would prefer to acquire the company outright. The companies held similar discussions a year ago, but no deal came to fruition, the newspaper reported, citing people familiar with the talks.

The deal would be the largest ever acquisition for Microsoft, but certainly manageable. Yahoo's market capitalization before the deal was announced was $38 billion, and the speculation is that the purchase price would be around $50 billion. Microsoft's market cap is nearly $300 billion and it had $28 billion in cash and short term instruments on its balance sheet as of Mar. 31.

Among bloggers on the Net, there is plenty of skepticism about a merger because of the size of the deal, the differences in culture, the abundance of executive egos, and the redundancies in technology. "If Microsoft buys Yahoo, Microsoft should immediately spin the Yahoo-MSN business out as a separate company," says Henry Blodget, the one-time analyst at Merrill Lynch, who now writes the Internet Outsider blog. "If it doesn't, both Yahoo and MSN will die." (see BusinessWeek.com, 5/4/07, "Yahoo, MSN "Will Die"").